Sept. 11 (Bloomberg) -- Triputra Agro Persada, the palm oil
company owned by Indonesian billionaires Theodore Rachmat and
Benny Subianto, will increase its planted area by two-thirds by
2015 as it prepares for an initial stock sale.

Triputra Agro Persada has been buying plantations since it
was set up in 2005 and currently owns about 300,000 hectares
(740,000 acres), Chief Executive Officer Arif Rachmat said in an
interview in Jakarta Sept. 7. It plans to increase its planted
areas to at least 200,000 hectares from more than 120,000
hectares with the help of funding from TPG Capital’s Indonesian
partner, Northstar, and Government of Singapore Investment Corp.

An initial public offering is planned for in three to five
years, Rachmat said. “We will do it at the most optimum time.
It’s hard to say where commodity prices will be.”

TPG’s Indonesian partner, Northstar, and the Singapore
sovereign wealth fund invested $200 million for a “small
minority stake” in Triputra Agro Persada in August and have the
option of investing an additional $50 million in the next few
months, the 37-year-old son of Theodore Rachmat said. That’s the
biggest private-equity investment in Southeast Asia’s largest
economy this year, according to data compiled by Bloomberg.

The benchmark palm oil price in Malaysia, the second-largest producer, has dropped 7.5 percent this year through Sept.
10 as a slowdown in China and Europe cut consumption. Global
demand for the tropical commodity used in everything from candy
to lipstick, is set to “grow strongly” because of its
increasing use in bio-diesel and electricity production,
according to a report by PricewaterhouseCoopers LLP this year.

‘Quite Comfortable’

“We are optimistic about the industry,” Rachmat said.
“It is not only driven by demand for food in countries such as
India, China and Indonesia, but also demand for bio-fuel.”

The company is “still quite comfortable” with the price
of palm oil because of record soybean prices, which have
increased the cost of a rival edible oil that’s crushed from the
beans, he said. The worst U.S. drought in half a century has
hurt soybean crop yields.

“Indonesia has not yet exploited its full potential as far
as palm oil production is concerned,” said Fauzi Ichsan, a
senior economist at Standard Chartered Plc in Jakarta. “If you
believe in the next five to 10 years global commodity prices
will rise further, you have to invest in Indonesia even though
there’s been a correction in the past year.”

Prospective Investors

In addition to the equity investment by GIC and Northstar,
Triputra Agro Persada also received more than $600 million in
debt financing from 13 local and international banks, including
a $260 million syndicated loan, to help fund its expansion,
Rachmat said.

“We always recognized the importance of having a sizable
land bank, as well as the increasing scarcity of suitable
land,” Rachmat said. “As our plantations come to maturity, we
are confident they will achieve the types of yields that the top
players produce in the industry.”

Triputra Agro Persada went through a “very professional
process” and approached a few “triple-A rated” prospective
investors this year before deciding on an investment by GIC and
Northstar, Rachmat said.

GIC invested in coal producer PT Adaro Indonesia together
with the founders of the palm oil company, Theodore and Benny,
in 2005, Toddy Sugoto, 36, commissioner of Triputra Agro Persada
and Subianto’s son-in-law, said in the same interview. Northstar
manages about $1.2 billion and was co-founded by Theodore’s son-in-law, Patrick Walujo.

Global Demand

Indonesia is the largest producer of palm oil, crushed from
an over-sized pineapple-like fruit and processed into oils. The
World Bank forecast in 2010 that an additional 6.3 million
hectares of palm oil plantations will be needed to meet global
consumption by 2020. Much of this land is set to be in Indonesia,
according to the report, with the country and Malaysia
accounting for 85 percent of the world’s palm oil production.

“We want to invest in an industry where Indonesia has a
very strong point,” Rachmat said. “Malaysia is already
achieving its plateau and Indonesia is still expanding.”

Triputra Agro Persada has more than 24,000 employees,
including more than 2,600 families who are involved in their
plasma program, under which the farmers lend their land to the
plantation company for development and receive a share of the
earnings in return.

Billions of Dollars

Theodore’s Triputra Group, which also has coal and rubber-processing ventures with Benny’s PT Persada Capital, posted
billions of dollars in revenue last year, the younger Rachmat
said, declining to be specific.

The coal venture, which accounts for the biggest share of
the two families’ portfolios, includes the billionaires’ stakes
in Adaro Energy and other coal concessions, Rachmat and Sugoto
said.

Their agricultural investments account for the second-biggest portion of their holdings, with Triputra Agro Persada
comprising the largest chunk of it, they said. Their rubber-crumb processing business, PT Kirana Megatara, is Indonesia¹s
largest by revenue, they said.

Triputra Group also has interests in auto manufacturing and
microfinance, and is the exclusive dealer for Honda Motor Co.’s
motorcycles in West Java.

Theodore, 69, and Benny, 70, each holds at least $1 billion
of assets, including their stakes in Adaro Energy, Indonesia’s
second-biggest coal producer, according to data compiled and
calculated by Bloomberg. The billionaires have known each other
since the 1960s when they studied at Bandung Institute of
Technology and began their careers at PT Astra International,
Indonesia’s biggest car seller. The younger Rachmat and Sugoto
declined to comment on their families’ wealth.